IN-DEPTH: How Xerox could affect Cincinnati's parking

Jul. 28, 2013

Parking meters in Indianapolis that take credit cards and coins. / The Indianapolis Star

Written by

Chrissie Thompson and Jason Williams

For local governments, turning over parking services to Xerox is often a boon.

The company, which is in the process of negotiating a contract with the Port of Greater Cincinnati Development Authority in Cincinnati’s controversial parking-lease deal, implements a tech-savvy system, runs it efficiently and consistently enforces violations. Revenues shoot up.

The Enquirer examined records, talked to national experts and analyzed data to find out what Xerox’s role in parking could mean for city government – and for those who park at meters in the city.

Xerox has been in the business of outsourcing – contracting back-office and data- or document-processing operations for both government and private businesses – for 30 years. It processes more government transactions than any other outsourcing firm.

The Norwalk, Conn.-based company has transformed itself from a printer, scanner and copier company into an outsourcing giant. It bought a Dallas-based contracting company in 2010, and outsourcing now makes up more than half of its revenue.

Xerox’s government contracts range from building states’ new health insurance exchanges to finding ways to put government payments such as unemployment or child support on debit cards to collecting bridge and highway tolls.

It operates speed and red-light cameras in Cleveland, linking them to a person’s parking tickets for a one-stop pay site.

The tech firm also oversees a complicated Ohio system that distributes commercial vehicle registration payments across 2,300 tax districts based on the number of miles a vehicle travels in each district.

Xerox’s government contracting load keeps growing because the company does what it was hired to do: In the 35 cities that use Xerox for parking, better enforcement and fine collection mean they make more money than when those systems were city-operated.

When Xerox runs a system, gone are the days of parking three cars in two spaces, borrowing someone’s leftover meter time or commandeering an expired space for an errand.

If the lease is approved by the port authority, which is reviewing details until Sept. 4, Cincinnatians face a cultural shift.

Parking laws aren’t changing, but the port authority is raising rates and fines. And with Xerox on board running a more efficient system, it’ll be more difficult to be a scofflaw.

“This is old-world parking versus new-world parking,” said Benjamin Dean, CEO of ParkIntuit, a Durham, N.C.-based parking technology and analytics firm. “What’s clear is that advanced technologies can drive more revenue, which is very good for your city. The question is: Do they actually make it better for the users?”

Some residents in Xerox’s other parking cities don’t consider the innovation worth the increased cost – and, to a few, the new technology hardly seems an improvement.

In Indianapolis, for example, excitement over fast installation of new meters has in some cases been tempered by frustrations over double ticketing.

“Xerox is very aggressive on citing people,” said Angela Mansfield, a Democrat on Indianapolis’ City-County Council. “And they don’t care. All they care about is the bottom line.”

FROM DOCUMENT PROCESSING TO MAJOR GOVERNMENT DEALS

Xerox now has more than1,700 contracts to run programs for state and local governments – about 20 percent of its total outsourcing business. It’s an all-in investment credited with saving the company.

In 2009, Xerox did only document processing work for governments. Then, it acquired Affiliated Computer Services, assuming ACS’ title as the largest government outsourcing firm in the U.S.

Since then, growth in government contracts has helped offset declining document-related technology revenue.

In its 35 parking contracts, Xerox has emphasized applications that let drivers pay from their smartphones, extending time by responding to an automatic text message alert.

Technology also allows Xerox to see exactly which parking spaces are open at any time and which expired spaces have cars in them.

For citizens, the system powers an app that helps people find parking spaces. For governments, it powers a swift enforcement system.

The company even has license-plate reading cameras that ride on an enforcement vehicle and help issue automatic tickets.

In Philadelphia, for instance, the cameras flag cars that have overstayed their limit in a meterless, timed parking zone.

In Boston, the cameras identify cars that don’t have permits to park in a residential zone.

Cameras are being considered for the Cincinnati system only to pursue violators with three or more outstanding unpaid parking tickets, Xerox and port authority officials said.

That’s similar to the way Cleveland uses the system, too, said Brett Peze, Xerox’s vice president of eastern U.S. parking.

In Cleveland, the combined speed-camera, red light-camera and parking-ticket pay system has cut down on the number of unpaid parking tickets. Pay rates have increased 70 percent under Xerox management.

“We definitely want the enforcement to be easy and accurate, but we also want to make it easy for people to pay the violations,” Peze said.

AGGRESSIVE ENFORCEMENT A CONCERN IN INDIANAPOLIS

The tension between the convenience of technology and the pain of enforcement has powered the debate in cities with Xerox parking contracts.

In Indianapolis, the city couldn’t afford to upgrade its 3,600 meters and was generally running short of money to improve neighborhoods and roads.

So Indy contracted with a Xerox-led group called ParkIndy to privatize its parking system.

Xerox would pay $20 million up front for a 50-year contract, and Indy would receive a share of the profits on parking fees and tickets for the duration of the contract.

Before choosing Xerox as the contractor, the city decided to raise parking rates for the first time in more than 30 years, doubling them in some areas. Meters that read credit cards were a must, and the contractor and the city wouldn’t benefit from higher parking rates until the company had installed new machines.

The firm also volunteered to create 200 nonparking-related jobs in the city for seven years.

“The technological changes have been remarkable and would not have happened if it were a government-only operation,” Lotter said.

With the changes in place, and with Xerox overseeing ticketing, profits have soared. In 2010, the city’s profit on parking was $339,000. In 2011, the first year of the Xerox contract, the city’s share of the parking profits came to $1.5 million; they hit $2.5 million in 2012.

But some Indianapolis leaders have long been concerned about Xerox aggressively enforcing parking violations to hit revenue goals, a major concern for opponents of Cincinnati’s parking deal, which would pay the city $92 million up front and $3 million a year for a 30-year lease on the meters and a 50-year lease on garages, the latter to be run by a separate partner of the port authority.

Last year, an employee of a downtown Indianapolis hair salon received two tickets in four hours for an expired meter while her car was parked in the same spot, said Mansfield, the City-County Council member.

That prompted Mansfield to sponsor a proposal calling for ParkIndy to limit its enforcement for such violators to one ticket per day. The proposal passed the council, but the Republican mayor vetoed it.

“It’s extremely frustrating,” Mansfield said. “And we’ve passed the point of no return.”

ParkIndy promises to spread out multiple tickets according to the length of time allowable on a meter, Lotter said. So downtown during the week, a car like the hair salon employee’s could get a ticket every two hours. After the third ticket, the city can tow the vehicle.

Multiple tickets per day are necessary to discourage parking too long in an expired spot, Lotter said.

“In some areas, it would be cheaper for someone to park and get a ticket and leave it there all weekend than to park it in a garage,” Lotter said.

In Los Angeles, the city oversees issuing parking tickets, but Xerox processes violations and handles the appeal process.

Soap opera actor Jeff Galfer and other residents have filed a class-action lawsuit against the city and Xerox, claiming the latter doesn’t allow violators to contest tickets at all, let alone through a fair process.

On the website www.nomoretickets.org, Galfer claims there is no appeals process, no payment plans and late fees that are “unfair and unwarranted.”

Neither Galfer nor his attorney returned messages left by The Enquirer.

A spokesman for Los Angeles’ transportation department, which operates the parking system, declined to comment on the lawsuit.

Xerox will not decide how to adjudicate appeals in the Cincinnati system, said port authority President and CEO Laura Brunner.

The city and Hamilton County have an agreement for the county to handle the appeals process, but that contract expires March 31.

Brunner said the city, county or a third party that’s not a part of the parking deal could be awarded the new contract.

Through the years, Washington, D.C., city leaders have uncovered several problems with Affiliated Computer Services, although most of the issues occurred before Xerox acquired ACS for $6.4 billion in 2010. A 2007 report by the city’s auditor found ACS’s mismanagement drove up costs by $9 million between 1999 to 2005.

Xerox spokesman Carl Langsenkamp said the company and city agree the auditor made several mistakes in the report. In addition, he said, Xerox-installed parking technology has helped Washington’s parking revenue increase five-fold in the past decade.

Xerox attributes some of the hiccups along the way to working out cultural differences between ACS and Xerox. After all, ACS’ 74,000 employees outnumbered parent-company Xerox’s 54,000. ACS had grown by acquisition, having bought 90 companies, Xerox spokesman Langsenkamp said.

“The difference is fitting that kind of fast-moving company in to Xerox’s culture, which was customer-centric: ‘What does the customer need and what can we do about it?’ ” he said.

New programs have also been successful.

In 2011, Xerox implemented a downtown Los Angeles pilot parking system centered on meter fees that fluctuate based on demand.

In high-congestion city blocks, for example, meter fees are set higher to create more turnover and prevent motorists from having to circle the block looking for a parking space.

Rates are set once a month, based on parking stats from the previous month.

Overall, meter revenue is up 2 percent, but rates have decreased by 11 percent, said Dan Mitchell, an engineer in LA’s transportation department.

Here at home, concerns about Xerox have centered on the company aggressively enforcing a system that calls for fines to double by the second full year of the deal.

But many citizens’ complaints are linked to decisions made by the city, not Xerox, company officials and analysts say.

While Xerox may recommend adding or changing parking spaces or using a dynamic pricing system, the client makes the final decision.

Generally, Xerox is responsible for technology and enforcement. In Cincinnati, the port authority board will make final decisions on system changes.

“Better enforcement is kind of a (Xerox) theme,” said Tom Davies, vice president of Xerox’s Government Solutions Group. “Tightening it up, if you will – that leads to greater revenues.”

It’s uncertain what exactly will be in the port’s deal with Xerox. Talks are ongoing, and the port and Xerox are trying to agree on the length of the deal and Xerox fees.

In taking over government operations, Xerox generally has a good track record of customizing solutions to each city’s situation, said George Tong, an analyst who follows Xerox for Piper Jaffray & Co.

Xerox “does take into account how things were done before, sort of the status quo, and it does take into account efficiency,” he said. “They don’t have a cookie-cutter solution where they put in a certain number of meters, try to raise rates a certain amount.”

In general, said Keith Bachman, an analyst following Xerox for BMO Capital Markets, most Xerox contracts are good deals for local governments. Services are more cost-effective and execution is excellent.

“Their employees are measured on their efficiency and their effectiveness, and I think they’re pretty good at what they do,” he said. “I think it’s more efficient for Xerox to do it than it is for state and local governments, (so) it’s better for the citizens to do it.” ■